1. Breach of Confidence – Personal Remedies ONLY
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Protect information considered confidential – Exclusive equitable jurisdiction
Protects UNAUTHORISED use of the information – NOT the information itself Misuse/threatened misuse that attracts
equity
To establish a BoC, the following elements need to be satisfied in relation to the information:
1. SPECIFICITY – The information must be specific
WRITE
a) Rule: Per O’Brien, the information the P claims to be confidential must be sufficiently identifiable and precise, rather
than something universally expressed.
b) The more precisely articulated the allegedly confidential information is, the easier it will be for the court to assign a
remedy if their claim was to be successful – per Justice Mason in O’Brien
c) P will argue that _________ is sufficiently specific and distinctive as opposed to Ocular Sciences whereby the
information was held to be too vague.
a. Point to information alleged to be “confidential” E.g. a document, trade secret, information of
medical/financial type
d) D must know what specific piece of information they can and cannot use, in this case D XYZ…..
a. Info capable of being defined with sufficient precision: Not a broad, general bulk of information, must be
specific O’Brien v Komesarof
e) The more specific/narrow the info, the more likely an enforceable injunction will be granted Ocular Sciences
f) Court will require D to describe in detail the information Ocular Sciences Employees Employee’s knowledge v
employer’s info – objective test Ocular Sciences. In this case D will argue that….
2. QUALITY OF CONFIDENCE
WRITE
a) Information must carry with it the necessary quality of confidence in order for equity to deem it worthy of its
protection (as per Megarry J in Coco v AN Clark) - Must be SECRET and have VALUE
b) Element 1: Secrecy ABC v Lenah Game Meats
• Rule: As per , information must be sufficiently secret as opposed to being common or public knowledge.
c) Factors to consider for secrecy:
• Degree of accessibility, Circle of confidence, Authority of disbursement.
d) Element 2: value
• Rule: Equity does not protect trivial or benign information – therefore, to warrant equity’s protection the
information must be of value and is assessed objectively by the courts.
• Just because of personal value to the plaintiff, does not mean the court will reach the same conclusion
• Usually commercial or personal information will be seen as value Commercial information:
e) P will argue per Coco Rule: Equity will protect secrets that it considered to arise from the ‘ingenuity of the human brain’
Coco v Clark
• If the P is arguing that a seemingly and initially generic idea is in fact confidential, they will need to be able to
prove they applied some skill and further refined the idea and changed the value of it (Talbot) – contrastingly,
the D in this circumstance would need to argue that it is an industry standard/obvious next step etc
• Where various pieces of seemingly public information are compiled in such a way that necessitates a certain
level of skill from the P, they may be able to succeed in attributing qualities of value Coco v Clark Personal
information:
f) Rule: equity will protect information of a personal and intimate nature as the act of making such information public
undermines the nature of the relationship between the parties
• P will argue that…..Religion as being considered personal i.e. Foster v Mountford: secret men’s business for
Indigenous communities
• Intimate information i.e. sexual or romantic information
• If the facts reflect a romantic relationship, the P may cite Giller and/or Wilson which helps to distinguish
between the obvious knowing that those in romantic partnerships engage in sex vs what intricacies of what that
personally entails for the couples at play – the latter = private and warrant’s equity’s protection
g)
Indicia
• The degree and extent of existing publication – i.e. secrecy (objective test) P will argue it was NOT be public
(readily accessible to public). D will argue the opposite.
• Chatrooms = idle gossip; not yet public (AFL v The Age)
• Rumour + Innuendo not enough AB v CD
• Information available overseas, not domestically = not public Saltman
• Must have value to the plaintiff – not trivial or banal o The maker has used his brain; but no acquired knowledge
in a particular field Coco v AN Clark
• Not only of value simply because P wants it kept a secret “in private” does not necessarily mean confidential
ABC v Lenah Game Meats
Categories of Information
a) Commercially Sensitive Information (trade secrets)
b) Talbot v General Television – idea for TV show communicated orally/in writing, Franklin v Giddins, – special type of
fruit; fruit stolen and propagated
c) Non-Commercial info (intimate/personal info)
d) Giller v Procopets – Revenge porn – sexual things inherently confidential o Forster v Mountford and Rigby –
Religious and cultural secrets o Wilson v Ferguson – explicit images posted online
e) Government Secretso Gov’t must prove publication not in public interest
f) Hybrid info (commercial + non-commercial) o Most likely celebrities – selling personal info
i.
Douglas v Hello – personal wedding to be kept secret for commercial reasons
If different defendants, consider each separately from here:
3. OBLIGATION/DUTY OF CONFIDENCE by the Defendant
WRITE
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Rule: The information must be imparted in circumstances importing an obligation of confidence (Coco) and a court of
equity will restrain the publication of confidential information that has been surreptitiously obtained OR information that
imparted in confidence which ought not be divulged
Therefore, generally obligations can be imposed in two ways:
▪ When information is improperly obtained
▪ When information was imparted in confidence and ought not to be divulged
Objective Test – onus is on P prove the information is confidential Coco v AN Clark (Megarry J) Would the reasonable
man, in the shoes of the recipient, know or ought to know that the information was imparted in confidence?
o Giving cases: when P gives information to D with the intention that it is to be kept confidential – the court has
confirmed that these sorts of cases indicate confidentiality (i.e. Foster, Wilson, Talbot, Saltman)
o Taking cases: Per Coco, if D surreptitiously obtains information through _____, there is an obligation to keep the
information confidential
o Blurting cases: Where D accidentally falls into information that the P has blurted out in a PUBLIC setting, there
most likely will not be an obligation of confidence (Coco)
o Wafting cases: D comes into information without seeking it out – question to ask is whether or not a reasonable
person in the circumstances of the defendant would realise that the information is confidential and if so, DOC is
imposed on them (AG v Gaurdian Newspaper) Focus – How the information was received? Does this impart an
obligation on the Defendant? If blurted out in public = NO DUTY OF CONFIDENCE (Coco v AN Clark)
o Information is stolen/improperly obtained = DUTY OF CONFIDENCE (Franklin v Giddins)
o Obviously confidential doc found accidentally = DUTY OF CONFIDENCE (AG v Guardian
o Newspapers) – reasonable person test o NB: Court will not protect negligence (where not enough was done to
protect info)
o Lenah Game Meats
o If info passed on to 3rd Party and they knew or ought to have known about confidentiality of original info =
DUTY OF CONFIDENCE (Douglas v Hello; Lenah Game Meats) Info imparted in confidence:
o If info used for a reason other than that which was authorised = DUTY OF
o CONFIDENCE (Castrol v EmTech) o If express restrictions on use = DUTY OF CONFIDENCE (SKF)
o So obvious, it goes without saying = DUTY OF CONFIDENCE (Giller v Procopets)
4. BREACH/UNAUTHORISED USE OF THE INFORMATION
WRITE
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Rule: Per Coco, unauthorised use of information will result in a breach of confidence
Breach can occur with two types of misuse. P will argue the type of misuse was
Actual Misuse = unauthorised use that has occurred Franklin; Talbot
o Where the information is surreptitiously obtained, there is no validity in ever using it and therefore its use will
automatically signal a breach Franklin
o Information can be given , however is misused nonetheless as it undermines restrictions surrounding the giving
of information (Castrol; Smith Kline contrast these two cases)
o Castrol: handed over information to a government body so as to help prove there were in fact complying with
statutory regulations however, with that information, an unrelated claim was brought against them pertaining
to misleading and deceptive conduct – the courts held that although the information was voluntarily given, its
use was obviously restricted and did not extend to that purpose – therefore, BREACH.
o Smith Kline: Required to hand over information about drug manufacturing – the
o government’s handling of the information constituted a breach in the eyes of Smith however it was overridden
by the fact that the information concerned that of public health Threatened Misuse = threats to use the info
unconscientiously
Checklist
o No intention necessary – can be accidental SKF
o Mere possession is not enough; must be “unconscientious use of the information” Gummow J in SKF
o Unconscientious = contrary to the wishes from the person to whom the info originated/belongs
o Without consent of Plaintiff
o Need not be used to the detriment of the plaintiff SKF
o Can be emotional detriment etc; not necessarily financial detriment
o ii. Obligation of conscience is with respect to confidence; not to refrain from causing detriment iii. Exception
– Government secrets
5. DEFENCES
WRITE
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D will argue per Gibbs J in Iniquity (Immoral Behaviour) – – reserved for serious crimes
a. Settled defence in Australia – high threshold AFL v The Age per Kellam J
b. Must show the following: () – did not meet threshold
i. Proposed disclosure must disclose the existence or real likelihood of an iniquity that is a serious
crime/civil wrong or serious misdeed of public importance (AB v CD – informant name revealed)
ii. “Public importance” = info must affect the community as a whole or affect the public welfare
iii. The person seeking to protect the confidence is trying to prevent persons with a real interest in
redressing the crime from knowing it
c. Public Interest
i. Not settled in Australia (supported in obiter Lenah Game Meats)
ii. SKF – court argued that this defence would erode the quality of confidence
6. REMEDIES for BREACH OF CONFIDENCE
NB: Only personal remedies (NOT PROPRITERY) are available for a Breach of Confidence
WRITE – refer detail of personal remedies section
1.
2.
Injunction
a. To prevent publication/dissemination of info
b. Can get an injunction ex parte for 7 days until heard by the court
IF TOO LATE FOR INJUNCTION (i.e. already published)
a. Account of Profits
i. Strip away profit the wrongdoer has made from misuse of information
ii. Unauthorised Profit = the profit on top of what would’ve been made without misusing the information
b. Equitable Compensation
i. Calculated at the date of trial
3.
ii. For suffering (Giller)
iii. Pecuniary Loss
iv. Springboard Principle
How much of an advantage did they gain from misusing (as opposed to work and skill principle) see Acc of Profits under
remedies
2. Breach of Fiduciary Duties
WRITE Although P and F’s [relationship] may not fall under an accepted category, these categories are not closed. Therefore,
it may still constitute a fiduciary relationship if it possesses the relevant attributes formulated in Hospital Products by Mason
J. Judges must ‘distil the essence or the characteristics of the relationship from the illustrations which the judicial decisions
provide.’ (Mason J, Hospital Products) F undertook to act on behalf/ solely in the best interests of P in [what activities were
carried out to represent P?]. This allowed F to exercise power or discretion which will affect the interests of P in a legal or
practical (economic) sense, leaving P vulnerable to abuse and affording F a special opportunity to take advantage of his
position. (Mason J per
Hospital Products) The law of fiduciary relationships concerns itself with certain sorts of relationships and aims to uphold the
integrity of those relationships. It is in equity’s exclusive jurisdiction.
A fiduciary:
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Cannot misuse his position or knowledge or opportunity resulting from it to his own or a 3rd party’s possible advantage;
or (Profits)
Cannot, in any matter falling within the scope of his service, have a personal interest or inconsistent engagement with a
3rd party (Conflicts) unless this is freely and informedly consented to by the beneficiary or is authorised by law
To establish existence of a FD and breach thereof:
1. DOES A FIDUCIARY RELATIONSHIP EXIST?
WRITE P needs to show the relationship between parties one to which fiduciary obligations attach? Therefore, governed by
the Conflicts and Profits Rule Chan
Accepted Categories
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Trustee (F) / Beneficiary Keech v Sandford
Solicitor (F) / Client Nocton v Lord Ashburton
Agent (F) / Principal McKenzie v McDonald Employee (F) / Employer Warman v Dwyer
Director (F) / Company Regal Hastings v Gulliver
Partnership (both F) Chan v Zachariah
Factual/Proven Categories (Analogise with the above)
WRITE P will need to apply the TEST: (Mason J in Hospital Products)
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Power/Discretion of one party over the other
Exercise of power/discretion affects principal’s interests in a practical/legal manner
Exercise of power to the detriment of the other, vulnerable to abuse?
WRITE Indicia
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Gibbs CJ, Breen An undertaking to act on behalf/in the interests of another person (the ‘critical’ factor: Mason J in
Hospital Products)
A relationship of trust and confidence (not sufficient in itself: )
Power/discretion by the fiduciary which could affect the beneficiary’s interests in a legal or practical way (such as their
economic interests)
A special opportunity to exercise the power vested which would be detrimental to the beneficiary o A beneficiary who is
vulnerable due to the position of the fiduciary (or ‘relies upon’)
Cases:
YES FR:
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Joint ventures (UDC v Brian) But UDC added need for mutual trust and confidence in each other
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Bulun v R & T Textiles)
Artist to Aboriginal tribe (
Bank manager and customer (Commonwealth Bank v Smith)
NO FR:
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Doctor/Patient, except where economic interests at stake Breen v Williams
Family friend to abused Child Woodhead v Elbourne
Supplier to distributor Hospital Products
Purely commercial agreement at arm’s length Hospital Products
Government to Citizen Habib v Commonwealth
Red flag: Any form of agency-like representation i.e. negotiation: ‘on behalf of’ or ‘in the interests of’.
WRITE F assumed to represent P’s [type of] interest What does D have the power and discretion to do?
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[Plaintiff] will argue that [fiduciary] has used this special opportunity to exercise power or discretion to the detriment
of [plaintiff’s] [insert interest] by [insert facts].
According, [plaintiff] reposed their interests in respect to [subject matter] in [fiduciary] in a way that made them
vulnerable.
Due to D’s power and discretion (relating to ___), he/she had the ability to affect P’s [TYPE of interest financial/property] interests. This is because D was able to affect his/her (legal/practical interests).
2. IS CONDUCT WITHIN FR’s SCOPE?
WRITE
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Not all aspects of the relationship between the parties are caught by the scope of the fiduciary duty (Hospital
Products; Breen), as these duties are not “infinitely extensible” (Howard). As such, the ‘actual circumstances of the
relationship’ must be analysed in determining whether each alleged breach(es) by [fiduciary] fell within the scope (Dixon J
in Birtchnell). Here, (state powers or discretion D exercised in which P has a vulnerable practical/legal interest?) (Mason J
in HP) The scope of P and D’s relationship can be ascertained by (contract docs (Hospital Products)/ conduct (Birtchnell)).
Is the transaction in question within the scope of the relationship?
Once the relationship is established, one must consider the scope of the relationship and how far the fiduciary relationship
reaches. Not all dealings between parties are subject to fiduciary obligations (Birtchnell – developers, FR was that profits
shared; Birtchnell used profits to develop outside the relationship = breach of profits)
NB: Frame the scope of the FR as NEGATIVE (i.e. The fiduciary undertook NOT to blah blah)
What Responsibilities has the fiduciary undertaken? (Grimaldi v Chameleon Mining) Indicia:
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A question of fact
Activity during Relationship v after relation ends Compare Bolkiah and Spincode Cases
May be narrow or broad
Pre-determined what the parties themselves have agreed Hospital Products
Ordained by past practice
Can be left to fiduciary’s discretion
May evolve over time
If activities inconsistent with written agreement, equity is not attracted Birtchnell
WRITE As D (has been assigned to do X) on behalf of P, their conduct of [conduct] falls within the scope of the fiduciary
relationship. It can therefore be argued that the scope of the relationship extends to (all dealings related to ___etc).
Therefore, (conduct) can be seen to fall within the scope of the fiduciary relationship.
3. HAS FIDUCIARY BREACHED CONFLICT/PROFITS RULES?
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WRITE Fiduciary duties are proscriptive, which means that fiduciaries have no affirmative duty but must refrain from
certain acts (Breen). Fiduciaries commit a breach by entering into transactions that create secret profits or occur in
circumstances of conflict (Chan per Deane J).
P may argue that D’s act(s) of … amount to a breach of (both) the conflicts/profits rule (Chan) (check if both apply) The
breach does not have to cause detriment to P (Keech), nor is D’s intention determined subjectively (Boardman).
A fiduciary must not:
1.
2.
Place himself in a position involving a real, sensible possibility of a conflict between (conflicts rule):
a. The duty to act as a fiduciary and his own interest (duty-interest conflict); or
b. The duty to act as a fiduciary to two or more persons (duty-duty conflict)
Make a profit out of a fiduciary position except with the informed consent of the principal (profits rule)
BREACH OF THE CONFLICT RULE
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Temporal Nexus - even if FR has ended, the FD may continue
Causal Nexus - gain which flows from the opportunity which comes from the FR
Will breach the Conflicts Rule if he has put himself in a position of conflict
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Actual conflict not required (there is in Nocton v Lord Ashburton)
A real, sensible possibility of conflict (Boardman v Phipps)
A significant possibility of conflict (Chan v Zachariah)
Opportunity arising out of the F’s position (Chan v Zachariah)
WRITE Fiduciaries must avoid conflicts of duty and self-interest AND between duties owed to multiple parties (Chan).
Per Lord Upjohn in Boardman, a fiduciary must not place themselves in a position involving a conflict or a real, sensible
possibility of conflict (Mason J in Hospital Products affirming). This involves a significant possibility of conflict per Deane J in
Chan.
Duty/Interest Conflict (duty as F and own interest)
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Personal interest in conflict with duty owed to principal
Profitable investment/transaction Boardman o Includes Commission/bribe Grimaldi; Reid
Intention of F not relevant Boardman v Phipps (Intended to ultimately benefit trust)
MUST have fully informed consent of the beneficiary Keech v Sandford
Past dealings/hope of future dealings are not necessarily a breach Pilmer v Duke Group
Can be liable even if profit is not made Nocton v Lord Ashburton
WRITE Fiduciaries cannot enter into transactions in which they have a personal interest conflicting, or which may possibly
conflict, with the interests of those whom they are bound to protect (Boardman).
D’s [fiduciary duty] is in conflict with his/her [personal interest] as [illustrate how D is connected to something else not in P’s
interests]. There is/is not a real sense of conflict (Boardman). Possibility of conflict: a reasonable person would believe that
there was a ‘significant possibility of conflict’, given [FACTS] (Chan).
Actual conflict: an actual conflict will be found, since (likely if actual thing has happened) (Nocton) Counter: fiduciary has a
contractual right to do act (HP)
Conclude. If relevant: a mere threat enough /no profit needed/ intention irrelevant.
Duty/Duty Conflict (duty to act as F to two or more people – Generally Solicitor Cases)
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If clear end of retainer – therefore FR and obligations end Bolkiah v KPMG
No clear end of retainer – therefore obligations continue Spincode
Can’t serve two masters (solicitor asking client to invest in development of which he was an director Farrington
WRITE A fiduciary must avoid owing duties to two or more persons who may have a real, sensible possibility of conflict
(Farrington).
[Fid] has breached their obligations due to the conflict between [DUTY 1] and [DUTY 2]. As [position], it appears that [Fid] is
also a fiduciary of [other party]. There is (clearly opposing / simultaneous representation / successive representation) OR,
despite the duties being similar – they are not opposing; hence the fiduciary can undertake both.
Simultaneous representation When there is an actual conflict of interest, [fid] must fully disclose this to [both clients] and
obtain informed consent to act on both parties’ behalf (Farrington). [Facts]… Regardless, it may be impossible to act
fairly/adequately act for both clients.
Successive representation Since D is no longer X’s (Solicitor etc), D may argue that no fiduciary duty exists following the end of
[relationship] (Bolkiah). However, under Australian law, fiduciary relationships can continue past the termination of
[role/retainer] (Spincode).
1. Especially since D cannot unilaterally terminate their relationship with P without informing P prior (Spincode)
OR
2. This is especially considering X has continued to seek D’s advice after [role ended]). Therefore…
Surviving the relationship
Trustee: P will argue that in a trustee relationship, fiduciary can survive termination where the opportunity for the conflict
arose from the relationship (Keech). Since … (analogise- opportunity to take up lease arose through the trust)
Partnership: P will argue that fiduciary obligation continues despite the [relationship is ending/has ended], since each partner
continues to be a trustee over assets in the course of winding up (i.e. until assets all sold) (Chan). Hence, the [opportunity to
take lease] arose from the relationship itself (Chan), resulting in a breach of duty.
BREACH OF THE PROFIT RULE
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Breach of Undertaking: when acting on behalf of another, you take that which belongs to them (or to the partnership)
Misuse of Position: taking advantage of information that you would not have otherwise had if you weren't in the FR
Requirements:
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Fiduciary has made an unauthorised profit (without consent); and
That profit was by reason of, or by use of, the fiduciary position, opportunity or knowledge resulting from it (Chan)
Intention is not relevant, need only a nexus between the fiduciary’s secret profits and fiduciary office
Includes Commission/bribe Grimaldi; Reid
The rule is generally inflexible and will be applied strictly (Boardman)
It is irrelevant whether P acted in good faith and/or P suffered no loss (Boardman) or P could not have obtained it
(Regal)
Examples of Profit Rule Breaches
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Company Director exploiting knowledge/opportunity from FR Regal Hastings
Solicitor exploiting knowledge/opportunity from FR Boardman v Phipps
Trustee gains benefit from trust at expense of beneficiaries Keech v Sandford
Irrefutable presumption that benefit obtained by FR
Partnership where one partner gains opportunity (profit) from partnership Chan
Joint Venture where one JVer acquires benefit without knowledge of other UDC v Brian Acceptance of Bribes which
include secret commissions Hong Kong v Reid / Grimaldi
WRITE D has an obligation not to misuse his position to make an unauthorised profit or divert an opportunity away from P,
since a fiduciary relationship exists (Chan, Deane J). As the profits rule is strictly applied, the fiduciary acting in good faith in
their breach is not relevant (Regal; Boardman)
A fiduciary must account for any benefit or gain: i. which has been obtained or received in circumstances where a conflict or
significant possibility of conflict existed…; or ii. which was obtained or received by use or reason of his position or opportunity
or knowledge resulting from it.” (Deane J in Chan)
4. DEFENCES?
WRITE D may argue that there was Requirements
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Full disclosure of all relevant facts; and Informed consent
NB: Onus is on F to prove consent was given
Checklist
May consent to, excuse or ratify a breach of duty (after material facts disclosed) Farah v Say-Dee
Consent MUST be full and informed Boardman
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If not, F can be liable even if F acted in good faith and benefitted the principal o Relevant facts include that F is going to
benefit from the activity Regal Hastings
Can be Constructive Consent
F acts with full knowledge of principal and therefore P has consented QLD Mines
ALL Principals must consent (Boardman – this is why solicitor was sued) o Onus on F to prove consent was given Who
can consent?
Director/Company – shareholders give consent (Regal Hastings)
Lawyer can receive consent OBO director/s o Generally, the principal gives consent
WRITE Although D may have breached their fiduciary duty, D may be exonerated if they can establish that P had fully
informed consent to authorise/excuse/ratify the breach after all material facts were sufficiently disclosed (QLD Mines). Here,
(consent to something has likely been given). However (not full consent / not from party eligible to give consent as …)
Conclusion: On balance, it is likely that D did/did not breach their fiduciary duty owed to P by
5. REMEDIES?
WRITE P will seek XYZ…
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Remedies for breach of conflicts rule:
o An injunction to restrain continuing breach - see personal remedies
o Equitable compensation (Nocton) o Appropriate where the breach has resulted in the principal suffering a loss,
but the fiduciary has not gained so much profit
o It is distinct from common law damages in that there is no remoteness test, and damages are assessed at the
time of judgment
o Rescission (Maguire v Makaronis)
o An appropriate remedy when a fiduciary enters a contract which might lead to a breach of fiduciary duty
Remedies for breach of profits rule:
o Account of profits: the fiduciary hands over all profits made, regardless of whether the principal incurred a loss
(principal will be an unsecured creditor, like in Regal) This is usually the appropriate remedy (Warman v
Dwyer)
o Proprietary remedies of constructive trust (e.g. in Boardman) or an equitable lien (a proprietary interest similar
to a mortgage, e.g. Warman v Dwyer)
6. THIRD PARTY (3P) INVOLVEMENT? ONLY GIVES RISE TO PERSONAL REMEDIES
WRITE) To establish whether a 3rd party is liable and can be sued, use the TEST IN Barnes v Addy Either Knowing Receipt
AND/OR Knowing Assistance. Equity may impose personal liability on third parties when fiduciary obligations are breached.
Thus, [X] may pursue [3P] for their involvement in the breach of fiduciary obligation by [Y]. The policy behind holding a third
party liable regards that if someone had some sort of knowledge that what the fiduciary was doing was wrong, and they still
engaged in those ‘wrong’ actions, they will be held liable.
1. KNOWING RECEIPT
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A stranger to the trust who receives trust property with notice of the trust becomes chargeable with it as a constructive
trustee (Barnes v Addy)
NB: If Fiduciary pays a 3P for services rendered, they are not in receipt of F property Mckenzie v McDonald ELEMENTS:
Primary Breach of Fiduciary Duty (see above)
The 3P must have received trust/fiduciary property
Property
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Real; personal; intangible (rights from contract; licences; shares, etc.)
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Westpac v Bell”: Fiduciary/Trust Property NOT information Farah v Say-Dee; Boardman
Trade secrets? Farah; Westpac v Bell Receipt
Possession can be continuous OR not
Under 3P’s control so as to misapply it Quince v Varga
For 3P’s BENEFIT Farah v Say-Dee
Not simply held while acting simply as an agent for another Quince
Required Level of knowledge by 3P
WRITE P will argue that 3D had some level of knowledge by the 3P that:
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It was fiduciary/trust property
Knew of circumstances that indicated BoFD
Constructive notice – inkling that something was wrong is not good enough to satisfy this test
Acceptable level of knowledge Baden Case
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Actual Knowledge of above; OR
Wilfully shutting eyes to the obvious re above; OR
Wilfully, recklessly failing to make enquiries that an honest/reasonable person would; OR
Knowledge that would indicate facts to an honest/reasonable person (constructive knowledge) – objective view (not lack
of morality).
2. KNOWING ASSISTANCE
WRITE P will argue that per A stranger to the trust, who, with knowledge, assists a trustee in a dishonest and fraudulent
design, is liable as a constructive trustee (Barnes v Addy)
ELEMENTS
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Requires Primary Breach of Fiduciary Duty (see above)
3P assisted in the BoFD
o Can be prior to breach, contemporaneous with breach, or following breach
o Should have causal effect to further the breach
o Encourage or induce breach (mere agents are not liable)
o Twinsectra (solicitor carries out instructions and pays unauthorised person)
o Permit act which allows breach to take place undetected
o Quince v Varga (permitting withdrawals by bankrupt beneficiary)
WRITE The property must have entered the ambit of the fiduciary relationship (Farah)
Required level of Knowledge by 3P Some level of knowledge by the 3P that:
NO DOUBLE RECOVERY
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If loss is $100 and $60 already recovered from F, Plaintiff can only get $40 from 3P
F implemented a fraudulent and dishonest design (breach); AND
3P’s assistance furthered that design (breach)
Constructive notice – inkling that something was wrong is not good enough to satisfy this test
Acceptable level of knowledge Baden Case
o Actual Knowledge of above; OR
o Wilfully shutting eyes to the obvious re above; OR
o Wilfully, recklessly failing to make enquiries that an honest/reasonable person would; OR
o Knowledge that would indicate facts to an honest/reasonable person (constructive knowledge) – objective
view (not lack of morality).
Fiduciary must have had a ‘dishonest and fraudulent design’ Consul
2 views: (Compare approaches??)
o All breaches of FD are “dishonest and fraudulent” IF: Westpac v Bell – acc. Farah
o More than trivial;
o Too serious to be excusable even though F has acted honestly and reasonably, therefore ought not to be
excused
o
o
Breaches are “dishonest and fraudulent” IF: Hasler v Singtel
There is conscious wrongdoing o Dishonesty = transgression of ordinary standards of honest behaviour
7. REMEDIES AGAINST THIRD PARTIES (3P)
WRITE P will argue that
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KNOWING RECEIPT – 1st Limb
o Constructive Trust
▪ D has given property to 3P
▪ CT over anything in 3P’s hands
▪ Subject to TRACING PRINCIPLES (see below)
▪ Registered Land – benefit of indefeasibility
o Personal Remedies
▪ Assets no longer in 3P’s hands
▪ Against 3P and original fiduciary
WRITE [3P] may be liable per Barnes v Addy for [knowing receipt], if the first limb of Barnes is satisfied (obiter in Farah),
entitling [P] to personal remedies. Although, it was held in Fistar that Farah did not completely prevent restitutional remedies,
3P recipient may take property subject to equitable title if they have level 4 knowledge.
Receipt means that [3P] must have taken title of the asset, not acted as a mere conduit in the transfer to another third party.
Per Barnes v Addy, [property] will be fiduciary as [explain].
As third party liability is fault based, [3P] must have knowledge of the breach to be liable in equity. In Farah, the first four
categories adopted in Baden were considered sufficient for receipt liability. [3P] is likely to argue that their knowledge would
only put a RP on inquiry. However, as [occurrences], 3P: (1) knew or had reason to know it was trust/fiduciary property AND
(2) Knew the circumstances that indicated the fiduciary’s breach (Grimaldi; Farah).
•
KNOWING ASSISTANCE – 2nd Limb
o ONLY personal remedies available (election)
o Equitable Compensation – if loss is suffered
o Account of Profits – if profit is made by 3P
WRITE Assistance [X] will argue that [3P] assisted [Y] in breaching their fiduciary duty owed to [X] by [CONDUCT] (Farah;
Consul)
Third Party Knowledge
See above table As 3P liability is fault based, [3P] must have knowledge of the breach to be liable in equity. In Farah, the first
four categories espoused in Baden were considered sufficient for assistance liability. [3P] is likely to argue that their
knowledge would only put a RP on inquiry. IF DIRECTOR AND CO: As this director is the mind and will of the company (OR of
the board), knowledge of that director is sufficient for the company. Fraudulent and Dishonest Design [X] must also prove that
[Y’s] breach was fraudulent and dishonest (Farah). This will be satisfied is [Y’s act] is considered to transgress the ordinary
standards of dishonest behaviour, involving an element of moral turpitude (Lifeplan, endorsing Hasler v Singtel per Leeming J).
[Y] ____ IF NOT CLEARLY MADE OUT → Farah below Compared from Westpac v Bell (Drummond J) interpreting Farah’s
understanding as lowering the standard of conduct is sufficient to constitute a ‘dishonest and fraudulent design’ to include all
breaches of fiduciary duty “if the breach of duty is more than a trivial breach and is also too serious to be excusable because
the fiduciary has acted honestly, reasonable and ought fairly to be excused”.
Considering that (no profit made/profit made), P is likely to see (EC for loss / AoP for profit).
Personal Remedies
1. Specific Performance
WRITE P will pursue SP for Breach of Confidence OR Breach of Fiduciary Duty or Third Party Liability (depending on the case),
because there is a contract.
WRITE P will argue that an order for specific performance requires that obligations arising under a contract be performed
and is necessary to compel the execution of a contract which requires some definite thing to be done before the transaction is
complete (JC Williamson). P may seek an order of specific performance, which would compel (D) to [perform their obligations
under contract]
(JC Williamson).
WRITE Not granted: However, it appears that specific performance would still not be awarded as (factor). This is analogous
to JC Williamson (D was a lessee of theatre, entered into oral agreement with P to exclusively sell confectionary to audience, D
wanted an early termination, P claimed SP – denied). P may seek damages or an injunction instead. Granted: For specific
performance to be granted, valuable consideration must be given, and damages must be inadequate. Here… There does not
appear to be any other bars specific performance, as.. Therefore…
P must demonstrate that there is:
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Valid Contract
Valuable Consideration
Plaintiff must be ready, willing and able to perform obligations under the contract
There has been a breach of contract
Common Law damages are inadequate
o Sale of land
o Sentimental value See circumstances… -
Consider:
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Fairness to both parties – unjust to force D to perform if P hasn’t Argyll
Issues of Supervision – court must be able to supervise the order; constant supervision undesirable Argyll Exceptions to SP:
The continued supervision of the court is necessary to ensure the fulfilment of the contract (Argyll)
Performance of the contract is impossible
The order is futile
The contract is one for personal services (Lumley: contract for employment at rival company)
There are other factors relevant, such as laches – defences
There would be undue hardship on the defendant (Patel)
Other equitable defence available – e.g. Patel v Ali
If these arise, consider Equitable Damages in Lieu of SP
2. Injunction and Specific Delivery
WRITE Authorised by s 37(1) of the Supreme Court Act 1986 to award an injunction
WRITE Akin to Spincode, an injunction may also be awarded as a final remedy for breach of fiduciary duty to stop… (firm
acting on behalf of 2 clients in breach) Specific Delivery As a specific form of mandatory injunction, P may seek the specific
delivery of ... to prevent/ so that … (Franklin). This may be coupled with a prohibitive injunction (such as that seen in Atkins) to
also prevent... The court will award an injunction where it is ‘just’ and ‘convenient’ to do so (s37(1)) Supreme Court Act).
Either:
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Mandatory Injunction – make parties do something
Prohibitive Injunction – stop parties from doing something
Interim/Interlocutory Injunction – temporary injunction until full hearing of case occurs
Interlocutory – obtained inter parte obtained prior to trial and remains in full force until then
Interim – obtained ex parte for a short period until parties can attend hearing for application re interlocutory
injunction Rationale:
Maintain status-quo until trial – no final determination
Can be made on terms (e.g. undertaking re damages)
Will be granted if: Gleeson CJ in Lenah Game Meats
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Prima facie case – likelihood of success come trial to justify injunction (Beecham Group)
Made with undertaking to pay damages (if claim is frivolous, P will pay damages) Foster v Mountford & Rigby
If the Balance of Convenience favours interlocutory injunction
Balance between status quo AND letting conduct occur before trial
Delay (Laches)
Effect on third parties
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Whether compensation would be adequate
Commercial factors – e.g. effect on business
Unconscionability (no automatic right to an injunction)
Specific Delivery (Form of Mandatory Injunction)
Order to restore possession of goods:
Confidential info: Destroy or deliver up Franklin v Giddins; Foster o Delivery of chattels to owner Atkins v Cooper
WRITE CONTRACT
P may seek an injunction to prevent (D) from breaching a contractual promise of exclusivity to (P) (Lumley).However, this
must not be a roundabout method of ordering specific performance (Atlas Steels), as specific performance cannot be
awarded for personal service contracts (Williamson). D may argue that an injunction should not be awarded as it would
be tantamount to specific performance when such a remedy is not available (Lumley), as … (conduct P would request…) it
is likely/unlikely that an injunction here would be granted, as it would (not) be the same as enforcing specific
performance of Permanent Injunction P may seek an injunction to [restrain/force conduct]. The court will award an
injunction where it is ‘just’ and ‘convenient’ to do so (s37(1)) Supreme Court Act (Vic)). Here, [apply to facts and how it
would ensure justice] (s.37(1) SCA (Vic), Lenah). As in Atkins, where the interlocutory injunction granted restored
possession of dog to the plaintiff, an injunction here would maintain the peace b/w [fid] and [P]. D may claim that
granting an injunction would not ensure justice as …Just & Convenient Injunctions are only available to support legal
(statutory) or equitable causes of action and are not available at large (Lenah). Assuming [BOFD/Breach of Contract
made out], this will be satisfied (c.f. Lenah). Further, the balance of convenience favours the award of an injunction, since
… (Atkins)D would argue that an injunction should be denied as it is futile (Spycatcher) or damages are adequate
(Douglas)
WRITE Interlocutory/Interim Injunction
Red flag - event/action about to occur which would damage their position - such as in Foster
P may seek an interlocutory injunction in order to … (Foster). This will be requested as a matter of urgency due to the fact
that ____. In order to obtain an interlocutory injunction to …, P will bear the onus of showing that there is a serious
question to be tried. P must also show that they will suffer irreparable damage if the injunction is not granted, and that
the injunction ought to be awarded on the balance of convenience (Lenah- Gleeson CJ)
Serious question to be tried (a probability) P must show a prima facie case convincing the court. Here__ • Irreparable
damage P will contend that irreparable damage will occur if ___, as ___ (analogise to Foster?). Counter – money would
fix? Foster – Damage would’ve been irreplaceable - loss = exposure of secret and sacred religion, monetary compensation
would not be able to fix the damage • Balance of convenience Lastly, it will be argued that an injunction here is
convenient, as (damages not adequate/ no TP etc). This argument would be bolstered by an undertaking as to damages
(Foster)
3. Damages in lieu of Injunction or Specific Performance
WRITE Per s 38 SCA, the Court may grant damages in addition to, or in substitution for, an injunction or specific
performance. LCA Damages are available where the Court has jurisdiction to hear an application for injunction or specific
performance. P could/not seek an injunction/SP as above, so Lord Cairns Act Damages are/not available per s 38 Supreme
Court Act. This is despite the fact that (injunction / SP was unsuccessful on X grounds)- as the mere possibility of this remedy is
sufficient for Lord Cairns Act damages to be awarded (Mills; Giller c.f. JC Williamson). D would argue P’ mitigation
involvement, to reduce influence (Mills). Ultimately, these damages will be measured against P’s loss for not having an
injunction/SP at the time of judgement.
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Where Injunctions/Specific Performance are not useful, Lord Cairns Act Damages can be awarded
Section 38 of Supreme Court Act 1986
Award when: Giller v Procopets
Info already distributed to society – no utility in injunction
If court has the jurisdiction to issue an injunction despite its uselessness
4. Declarations
WRITE A declaration is a final statement of the rights of the parties. It doesn’t create any obligations and can only be sought
by a person with a ‘real interest’ in the Issue. (P) is able to seek a declaration per Supreme Court rule 23.05 without
consequential relief. P will contend that a declaration be made which states … Although infrequently used, a declaration is
appropriate in this situation considering (Govt- Cth v Sterling Nicholas, and proposed activities?): Counter: purely a
hypothetical? (Sterling Nicholas)
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Statement regarding the rights of the parties – not an enforceable order General Points:
Sought by personal with real interest in the issue – generally ex parte
Can be sought without consequential relief
Can be sought in relation to proposed/future activities Commonwealth v Sterling Nicholas
5. Equitable Rescission
WRITE As P’s entry into the contract/ transaction with D was affected by the equitable wrong of (breach of fiduciary duty /
undue influence/ unconscionable conduct/ misrepresentation) (Vadasz), if P elects to rescind the contract it becomes void. The
measure of rescission is the value of the asset when the transaction took place (McKenzie)
The [contract] has been tainted by a [BoFD] by [fid]. Therefore, the contract would be voidable, which allows P to elect to
rescind it and be restored to his/her pre-contract position (Daly). CLEAR: Here, a BOFD entitles [P] to a full rescission (Maguire)
→ (outcome). However (pecuniary rescission).
PARTIAL rescission: D may contend that only partial rescission ought to be available, since (would have entered at lower
price/would have done X still). As such, the transaction would only need to be undone to the extent that .. (Vadasz). However,
this argument fails in the context of breach of fiduciary duty (Maguire). This is because a reversal of wrongdoing in this
instance requires the reversal of the exercise of power or discretion in circumstances of conflict/profit. This would have the
practical effect of undoing [the transaction] in its entirety.
Pecuniary Rescission: However, the (subject matter of K no longer available). Consequently, the application of the Bona Fide
Purchaser Rule means that full rescission is unavailable. Therefore, it is likely that the court will affect a practical reversal by
awarding ‘pecuniary rescission’ and granting a monetary remedy in favour of [rescission]. This is akin to the case of McKenzie.
Therefore, (CHECK WORTH – If breach is sale for $5K when worth $10K, reversal= $10K returned)
•
•
Plaintiff may ELECT to rescind contract; restore parties to pre-contractual positions;
Voidable as a result of the transaction taking place through a BoC or BoFD
Total Rescission (CL)
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Sets aside ENTIRE contract
Must be able to PRECISELY RESTORE parties
Partial Rescission (Equity)
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Sets aside part of contract, leaving the rest on foot
Court can do what is “practically just” could not return concrete therefore modified contract
Vadasz v Pioneer Concrete
Maguire v Makaronis
already benefited from obligations; can’t have full rescission
Substantial Rescission
•
Where rescission is sought but is not possible as property/money has passed to bona fide 3P Effectively a monetary
remedy restoring P to pre-contractual position McKenzie v McDonald
6. Account of Profits
WRITE Strip any profit the wrongdoer has made from the breach (not punish) P may seek an account of profits to strip D of
the unauthorised profit of [amount] being the value of the profit when the breach occurred (Warman) [or the ongoing profits
obtained through use of that opportunity] (Lifeplan). P can establish a sufficient link between the profit and the wrong, if, but
for the breach the profit would not have been made (Lifeplan). P will likely seek [link to facts for
timing/continuation/appreciation].This is subject to an allowance for D The policy behind an account of profits is that the
fiduciary must account for what has been acquired at expensive of the trust, and aims to ensure fiduciaries conduct
themselves “at a level higher than that trodden by the crowd” (Warman)
Factors:
•
To what extent did D’s success come from the breach (Causation element Lifeplan; Warman
WRITE Causation is satisfied, as [benefit/gain] would not have been obtained (by Fid) but for [breach] (Lifeplan).
If other causes of loss exist: As equity is concerned with vindicating the equitable obligation that has been breached, a ‘but
for’ connection will be sufficient even when other contributing causes exist (Lifeplan). Hence.. An allowance may be made for
D due to their significant contributions of time/effort/ expenditure in making the profit (Warman; Boardman). HERE, they _.
As a result, an allowance (of $) will be included in order to …
• To what extent did success come from D’s skills, efforts, abilities etc.
• Onus on D to prove skills’ contribution; or else liable for 100% of profit
• If benefitted from acquisition of specific asset (trust money)
• Benefits likely to be short term and therefore as a direct result of BoFD/BoC Warman
If benefitted from acquisition of a business In more intricate circumstances, the quantum that [D] is to be held liable for
depends heavily on the circumstances of the case (Lifeplan)
WRITE CLEARLY ENTIRE BUSINESS – Lifeplan
“The judgment ultimately to be made by the court from which the order to account is sought is correspondingly not only
factual; fundamentally, it is evaluative.” (Nettle J) It appears that [the entire business] was formed in breach, as (no head start
period / rebutting 5 year plan argument – situation would not have changed without breach). This situation can therefore be
analogised to that of Lifeplan and contrasted to a case such as Warman due to a distinguishable lack of external factor which
could justify a ‘head start period’ being found.
WRITE Since (no profit) would ultimately have occurred ‘but for’ the breach (despite the fixed period of their ‘plan’?), an
appropriate quantum for this account would be the net present value of (business) (Lifeplan). This is irrespective of the fact
that (not all profits) were the ‘direct result’ (of the knowing assistance), as (could not have done it otherwise) (Lifeplan).
Therefore (final outcome). An allowance may also be made for D due to their significant contributions of time/effort/
expenditure in (what they did) (Warman; Boardman). This would amount to (use figure if given- $ / 6 months etc) The need to
ensure that the remedy is not "transformed into a vehicle for the unjust enrichment of the plaintiff”
WRITE ONLY HEAD START PERIOD – Warman
Due to the analogous nature Warman to these facts, it appears that it would be inequitable to order an account of [entire
profits] (c.f. Lifeplan). (explain how D could have terminated and started fresh after X time / external factor justifying head
start). Therefore, it appears that an account of profits would only be awarded for (period of time), as this is the only period in
which the profits can be causally connected to the breach. This would therefore prevent the unjust enrichment of P that would
occur if the whole business was accounted for (Per Nettle J’s dissent in Lifeplan). An allowance may also be made for D due to
their significant contributions of time/effort/ expenditure in (what they did) (Warman; Boardman). This would amount to (use
figure if given - $/ 6 months etc).
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Long term gains
Inappropriate to be held liable for entire profit
More likely to be from work/skill
NO DOUBLE RECOVERY
•
If loss is $100 and $60 already recovered from F, Plaintiff can only get $40 from 3P
BOTH PROFITS & LOSSES
•
Can get different remedies from F and 3P; If F makes $200 profit and P makes $100 loss – a/c of profits v F and Equ.
Comp v 3P Michael Wilson v Nicholls
7. Equitable Compensation
Compensate for loss suffered by Plaintiff; restore Plaintiff to position had the breach not occurred
WRITE Equitable compensation is restitutionary, serving the purpose of compensating for loss (Re Dawson). P will contend
that Equitable Compensation ought to be paid by [Fid] for (future/expectation losses?) (Nocton).
There must be a causal link between the breach and loss suffered. This is a but for (causation test), but which will incorporate
common sense (Canson).The classification of the breach will frame the remedies (AIB)
Available for
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BoFD – NOT FOR BREACH OF PROFITS RULE Warman; Nocton
BoC Giller v Procopets; Wilson v Ferguson Breach of Trust Re Dawson; Youyang Key points
Amount of loss judged at time of restoration, not at time of breach Re Dawson
WRITE (P) may (also) be able to seek some compensation as remedy for their mental and emotional distress, considering
(that the info leaked by D was of personal nature?) (Jane Doe; Giller; Wilson). However, this appears unlikely in the breach of
fiduciary context, as P would struggle to establish an appropriate connection between the loss and a relevant practical or
legal interest.
•
Not punitive – must do justice between parties
CAUSATION FOR EQUITABLE COMPENSATION PTO
CAUSATION FOR EQUITABLE COMPENSATION
WRITE CLEAR: Common sense (Canson) also dictates that (loss) was caused by D, since … (Nocton). This result is similarly
obtained through application of Youyang, as (loss) would not have occurred ‘but for’ the breach. NOT BREACH OF TRUST: P
will seek to apply the ‘but for’ analysis in determining causation (Youyang). But for [the breach], (what would have happened?
500K in trust account etc – no loss). Analogise. However, as this loss is not one which resulted from breach of trust, D may
contend that it is necessary to consider ‘common sense causation’(Canson). (Explain why there is some common-sense
problem, court may use discretion to reduce even though strict notions of mitigation don’t apply at Equity (CBA v Smith).
Analogise: IF BREACH OF TRUST: Ultimately, recovery for [P’s loss] is to be established on a ‘but for’ basis, as applied by the
High Court in Youyang . ‘But for’ [the breach], (what would have happened- 500K in trust account etc – no loss) On this basis..
If relevant- It is irrelevant whether [loss] was reasonably foreseeable, as the loss simply needs to flow from the breach
(Canson). Consequently… However, it may be argued that D attempted to restore the situation by ... If this argument is made
out, then D would only be liable to the extent of the imperfection (AIB). Conclusion: As… D will …
Must establish causal link by either:
a)
“But For” Test Re Dawson; Youyang
• “But for the breach, the loss would not have occurred”
• Esp. where breach of trust
• Often will establish common sense link
b) Common Sense Approach (Maguire)
• Does it make sense intuitively to establish a link between the breach and loss?
Common Law Principles and Equitable Remedies
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NB: Principle of Election - For A/C of Profits & Equitable Comp
Where the plaintiff has both suffered loss and the fiduciary has made a profit, the Plaintiff must elect between a
compensatory remedy and A/C of Profits Warman v Dwyer
WRITE Where both Equitable compensation and account of profits are available, [P] is entitled to elect the most preferable
remedial outcome (Warman). However, there cannot be double recovery for the same breach (Club of the Clubs). Multiple Ds:
(Club of the Clubs) As here there are multiple defendants, (P) can seek different remedies against each (Club of the Clubs;
Michael Wilson) However, each wrongdoer is only accountable to the extent of their liability. Therefore…
WRITE Exemplary damages P may argue that due to the severity of the breach in [describe], they should be awarded
exemplary damages. However, there is no jurisdiction for Equity to award exemplary damages, as Equity has no punitive
objective (Harris v Digital Pulse). Instead, aggravated damages?
8. Equitable Defences
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Laches (Delay)
Plaintiff unreasonably delays bringing action – court may refuse relief Factors:
Effect of Delay
Length of Delay
Whether delay is evidence of agreement/acceptance – no equitable claim
Nature of acts done during delay period
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Subject matter of the claim
Baburin v Baburin
Waited 19 years – unaware of rights – would prejudice innocent 3Ps o No relief
Unclean Hands
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Plaintiff’s conduct is questionable – against equitable maxim of coming to equity with clean hands Factors:
Must be a nexus between P’s alleged actions and current situation – proportionality Black Uhlans v NSW Crime
Commission
General naughtiness or a desire to censor the P is not enough Black Uhlans
Immoral conduct not enough Argyll
Actions must have immediate and necessary relation to the equity sued for Black Uhlans
Undue Hardship
Where remedy will cause hardship to D, court may refuse it Patel v Ali
Factors
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Financial inability NOT enough
May apply where material injury to one’s rights
Mere speculation not sufficient
Re Specific Performance, can be taken at date of contract formation.
PROPRIERTY REMEDIES
WRITE Proprietary remedies are not available at large. P must identify the property and demonstrate the causal link between
the BoFD and the property P wants to assert their equitable rights over, for P to be entitled to a proprietary remedy.
•
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Aimed at the property in possession of the defendant
Useful when D is insolvent/bankrupt
WRITE As [broke], however, it appears that full justice in disgorgement can still be achieved without a constructive trust
(John Alexander). This is because as D’s [payout] will be available for distribution onto creditors. Despite the court’s reluctance
to consider such factors in Reid, this approach would be preferred as a lesser order in these circumstances is incapable of
fulfilling full justice (John Alexander). Thus, an AOP for … will likely be awarded. This can be secured by with an equitable lien
over ...
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Enforceable against 3Ps – unless Bona Fide purchaser without notice or for value Property availability is subject to
tracing
OPTIONS
1. Constructive Trust
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P is entitled to all or part of the property in equity
Order that D holds the property “on trust” for the Plaintiff
2. Equitable Lien (charge)
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Plaintiff has security over the property to satisfy a debt
Attaches to property, but Plaintiff does not obtain the property itself
Differences between CT/Lien
a)
Beneficiary of CT has equitable title; can obtain an order for transfer of legal title. BUT holder of lien has neither legal nor
equitable title, and can only obtain court order for sale of property
b) Beneficiary of CT gets all the benefits and limitations of title. So if property increases in value, they get increase; if it
decreases in value, they get decrease. IN CONTRAST, holder of lien gets security over property for a $$ figure. If value of
property moves up or down, it has no effect on $$ figure. If lien can’t be satisfied out of devalued asset, defendant still
liable to pay balance.
c) Beneficiary of CT can insist property be transferred to them. But a lien can be discharged out of any $$ source- if lien
discharged, holder of lien has no claim to property.
CONSTRUCTIVE TRUST (CT)
2 TYPES
1. Institutional CT
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Arises by operation of the law and existing rights
Although no CT declared, it arises through the particular breach
Breach of Trust – Fiduciary deemed to hold the property on CT for beneficiary Chan v Zachariah
Boardman Reid; Grimaldi)
WRITE D [INSERT CONDUCT] is a misappropriation of an asset by the fiduciary. This misappropriation enables proprietary
remedies to be ordered and (asset) will be held on a constructive trust/EL in D’s hands from the moment of wrongdoing (Chan
v Zacharia).
WRITE D has misappropriated an opportunity to (X). Hence, the (identifiable asset) which is attained by misconduct is held on
constructive trust/ EL in the name of [fiduciary] at the time of acquisition (Boardman).
•
Misappropriation of Opportunity – CT over any profits (note scope below) Bribes/Secret Commissions – F holds bribes
on CT for principal
2. Remedial CT Created by the court
Arises where no pre-existing rights
WHEN CAN CT ARISE?
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P has traced all his property to D
When property has been assigned for value (Tailby)
Where equity recognises an invalid legal assignment of property
Where there is a breach of Fiduciary Duty or Trust
There MUST be a sufficient connection between Scope of FR and the property over which CT is sought.
WHEN A CT CANNOT ARISE
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D will be unduly deprived
There is an appropriate lesser remedy with no adverse effects on 3Ps
No proprietary rights are involved
A bona fide 3P purchaser for value is involved (see tracing).
NB: Scope of CT
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Can account for all profits etc. from misappropriation of opportunity
Can also allow for skill which was used to obtain that profit and adjust CT accordingly Boardman
EQUITABLE LIEN (EL)
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Acts like a mortgage – security over property to secure a debt
If debt not paid, property would go to Plaintiff to be sold
No transfer of title over property – but can force sale by court order
A Lien must accompany a personal remedy
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For example, an account of profits which is secured by a lien over the defendant’s property to the value of that judgment
debt (Warman)
This means that even if the value of the property has changed, the amount secured is the amount which the plaintiff is
entitled to (even if it goes up)
Elements
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When it arises.
Who has the benefit of it.
Over which property it secures; and
To what amount it secures
Entitlement:
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ONLY to underlying debt; NOT value of property o If debt = $10,000, secured by Lien over a boat worth $15,000
Plaintiff can sell boat, but will only be entitled to $10,000 to service underlying debt
If value of property decreases so that debt is not covered, balance can be recovered by personal action
TRACING
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To identify property in the defendant's hands which creates a connection between that property and the plaintiff's claim.
i.e., D takes painting from trust, sells painting, buys yacht - P can make a claim of the yacht.
WRITE To gain a proprietary remedy, the P must make out the groups for proprietary relief AND be able to identify the
property in the hands of a defendant. The process by which the P identifies the property is called tracing (Foskett).
WRITE WHEN ADVISING SOLELY ONE PARTY IN A TRACING SITUATION
WRITE In the context of [Fid], the (money) given to [TP] has thereby been dissipated by [Fid]. As such, they will be personally
liable for ___ compensation for running down trust property (Re Dawson; Youyang). Then when discussing TP – discuss TPL
(likely), tracing as a wrongdoer and tracing if innocent (Re Diplock)
When Tracing ends:
a)
When property dissipated – no longer exists (destroyed or disappeared)
a. Potential equitable compensation if proven to previously exist
b) When asset goes to Bona Fide Purchaser who has given value (purchased) without notice of the breach
a. Title of such a purchaser cannot be impugned
P can claim EC for the breach of CT caused by the dissipation of the asset /Trace trust property into cash Fid received on sale.
When to use Tracing:
Where defendant takes property of a trust etc. and:
1.
Exchanges it for another asset - Substitution
2.
Mixes it with either his own property or property of other parties - Mixing
3.
The substituted/mixed property increases in value (who gets benefit of increase?)
4.
Transfer it to a 3P volunteer (who may or may not have mixed the property)
a) Is the 3P volunteer innocent or not knowing receipt Barnes v Addy
b) Barnes v Addy Test Applies
a. Include 5th element constructive inkling of breach
b. Taken on facts
WRITE Starting Requirements:
1.
Establish Breach of Fiduciary Duty
1. Establish right to Constructive Trust:
a) Institutional CT (for BoFD/Trust)
b) Remedial CT (Bribes/Secret Commissions)
WRITE Historically, bribes/secret commissions could not be held on a constructive trust, as the property never ‘belonged’ to
the principal in any way (Lister & Sinclair). Thus, [P] would instead be merely given a personal remedy (see above). However,
Grimaldi confirmed the preferred approach in Australia from Reid, where constructive trusts can be imposed over secret
bribes and commissions. Therefore, a CT could potentially be awarded over [bribe]. A CT in this case is a discretionary remedy
as opposed to one that arises automatically when a bribe/commission is received (Grimaldi c.f. FHR). No 3P issue: there does
not appear to be any third-party considerations with respect to [bribe], however, full justice in disgorgement appears to
require a constructive trust to be imposed over the bribe money in X’s hands (John Alexander)
2. Establish there is an ability to identify the property in the hands of the Defendant a. Ascertainable
a) Not dissipated
b) If 3P – Bona Fide Purchaser for Value??
SUBSTITUTION – exchange of claimant’s asset for another asset by Defendant
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Must be able to trace original property to current property
Apply Foskett Rule Foskett v McKeown o The defendant said to hold the property ON TRUST for the claimant
Claimant can elect:
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Property to be transferred to the beneficiary – Constructive Trust, OR
Personal action for breach to secure restoration of funds (Secured by Equitable Lien), OR
Combination of CT and EL if values don’t add up
If use fund money to improve own property (e.g., use to paint own house)
If mixing involves improvement of tangible - TRACING ENDS (PERSONAL REMEDY AVAILABLE) If intangible (money,
shares etc.) - TRACING CONTINUES
If new property has increased in value
Apply Scott v Scott
o If trust money purchased 60% of house, beneficiary entitled to 60% of increase in value
MIXING
Mixing in Bank Accounts
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Clayton’s Rule in Devayne v Noble, Re Hallett’s Estate applies
Originally applied “First In, First Out” In Australia, rule in
WRITE As (D) has used (P) (original asset/money) to improve the value of their bank account, the parties’ claims to the
account money are proportionate (French Caledonia). This is irrespective of the exact practical order of deposits. On this basis,
(proportions)
DISSIPATED – Consequently, (amount spent in wasting the cash/ improving a tangible etc). This can therefore be deemed to
have been D’s money that was wasted in (this) (Re Hallet), due to the unfairness of the ‘First in, First Out’ rule from Clayton. If some of P’s is wasted, minimal possible – EC for dissipation (Youyang; Re Dawson) - Re Oatway: mixed funds used partly for
an investment and rest dissipated, trustee will be presumed to have invested the trust money.
APPRECIATED – Consequently (spent on something which has appreciated). Fid’s Money can therefore be deemed to have
been spent in (Purchase) (Re Hallet), due to the unfairness of the ‘First in, First Out’ rule from Clayton. As such, Fid can asset a
constructive trust over (new item) by way of tracing (Foskett)
GIVEN TO TP - In the context of [Fid], the (money) given to [TP] has thereby been dissipated by [Fid]. As such, they may be
personally liable for ___ compensation for running down trust property (Re Dawson; Youyang). Discuss TPL (likely), tracing as
a wrongdoer and tracing if innocent (Re Diplock)
Scenario 1 – Where mixing in a bank account and some money has been spent (Re Hallett’s)
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PRESUMPTION = fiduciary has spent their own money first (not beneficiary’s)
Therefore, that which remains belongs to the beneficiary
Fungibles = shares and money
Brady v Stapleton – sold some shares (including those taken from trust), said to have sold own shares first
WRITE As D has mixed (shares bought with their money and shares bought in breach) (D) will be taken to hold (P’s)
proportionate share of the bundle on CT (Brady). As such, a CT would have awarded over [Fraction] of [Property] to reflect
their original contributions. or (P’s) [portion] first (Brady; Re Hallett).
Increases- Since (improvement has occurred), P will elect that it was their [portion of the bundle] which was used first, such
that they can trace into and assert a Constructive Trust over the [new asset]. As a result (practical outcome). Decreases- Since
(decrease has occurred), P will argue that it was D’s [portion of the bundle] which was used first. As a result (practical
outcome- consider lien though).
Scenario 2 – Where mixing in a bank account and an asset has been purchased from account
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PRESUMPTION = the beneficiary will take the appropriate percentage of that asset
The court will presume that the trustee has acted in the interests of the trust and therefore the beneficiaries to the trust
will benefit from the asset’s purchase Re Oatway
Scenario 3 – Where money was taken from multiple innocent parties (beneficiaries)
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Beneficiaries will share proportionately to their contributions to the mixed fund Re French Caledonia Travel
Known as “pari passu” (equal footing)
Mixing with Fiduciary’s Own Property
WRITE IF EASY- As (D) has used (P) AND (TP’s) (original asset) to improve the value of their bank account, the parties ‘claims
to the account money are proportionate (French Caledonia; Barlow Clowes). This is irrespective of the exact practical order of
deposits. On this basis__ (follow how cash spent- if increase, proportionate ownership, if decrease all D’s until D is out, then
proportionate loss to be claimed back on EC). each party’s share have fluctuated over time due to (D) [actions], the lowest
intermediate balance rule must be applied (French Caledonia) in order to determine the ultimate proportions of the account
Initially, the proportion of the account was (D:P:3rd). Then D spent… on … Following D added… from ... (P/3rd/D). This brings
proportions to D:P:3 … (Here, note if one person’s proportion is low due to order of transactions – state how AoP or EC would
apply for that part of wasted money – CONSIDER BALANCE). Finally, D spent… on… The final proportions in this asset are
D:P:3… , so P is entitled to…
Scenario 4 – When the plaintiff’s own property has contributed in part towards the acquisition of a new asset (not through
a bank account) – not needing a physical mix of assets.
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Entitled to the proportion that was used to contribute to the asset
Foskett v McKeown – 2/5 of funds to purchase insurance policy; entitled to 2/5 of payout
WRITE Equitable property rights could be traced into (funds) for which (Asset) was sold (Foskett)
Scenario 5 – When payments are made into a mixed fund
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Plaintiff elects: (depending on value – CT v EL)
▪ CT for proportionate share of the asset; OR
▪ Personal remedy secured by equitable lien
OTHER SCENARIOS (Shares and real property/Houses)
Scenario 6 – Mixture of shares which are then sold by F (Brady v Stapleton) Trustee presumed to have transferred his own
property FIRST Elect either:
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Acquiring of proportionate of the several assets (fungibles); OR
A personal remedy secured by an EL over the assets
Scenario 7 – Misappropriation of funds used to buy a house/property (Scott v Scott)
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An Equitable Lien
Account for the increase in value of the house.
Plaintiff entitled to the same proportion as the trust money contributed to the house’s purchase
WRITE D has used P’s (original asset) to assist in buying … and … D is taken to hold title of the asset in equity proportionately
to the parties’ initial contributions (Brady; Foskett). Hence, D will hold [portion of asset] in equity. Alternatively, P may
consider a proportionate lien over [new asset] to secure a money remedy with respect to the [asset] (Foskett; Brady). IF
INCREASE IN VALUE- This [AOP] would include (appreciation), as D’s retention of .. is wrongful (Scott).
Scenario 8 – MIXED PROPERTY IS NOT SEVERABLE – A house
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Foskett ; Brady Scott
A lien or charge to secure the money () including any profits (Scott); or
A CT over a proportionate share of the property purchased (; Foskett)
WRITE D used (P’s) (original asset) to assist in improve their (intangible asset), the parties will hold title to [the asset OR
proceeds of asset] proportionally in equity (Foskett; Brady). Consequently, P is entitled to [%? ], akin to the case of Foskett.
3P VOLUNTEERS
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Claimant may be able to trace his property into the hands of a 3P (Re Diplock)
To Trace this property and claim:
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3P must be a volunteer (no consideration) Re Diplock
If not, they are a bona fide purchaser for value and CANNOT BE TRACED
3P must have knowledge that the property was fiduciary property Barnes v Addy
Scenario 1 – No Mixing with 3P Re Diplock
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Volunteer holds property on trust for the rightful owner
Scenario 2 – Mixing into 3P’s bank account Re Diplock
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The rules above re bank accounts apply
WRITE As (3rd Party) did not provide value in exchange for the (asset), they are a volunteer therefore P can follow their title.
However, as (3P) was an innocent volunteer (not a BvA wrongdoer & no knowledge) and has mixed … it appears that tracing
is brought to an end (Re Diplock). Instead, P will have to take their remedy against (fid) (likely a see above)
Scenario 3 – Money is mixed and used to buy new asset Re Diplock
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Beneficiary entitled to secure amount by equitable Lien
If new asset increases in value, beneficiary does not get a share in proportionate increase
If new asset decreases in value, the loss is shared proportionately o Consider a Constructive Trust here (Foskett)
WRITE As (D) has used (P’s) (original asset) to assist in buying (intangible asset), (D) is taken to own … proportionate to their
contribution (Brady). As such … (proportion) of the indistinguishable bundle belonged to X. D has mixed [asset] with P’s and
used it to improve [D’s existing tangible asset], tracing is ended (Re Diplock). As such, P will be entitled to $__ equitable
compensation to reflect the dissipation of the trust (Re Dawson; Youyang). It appears that P may be entitled to a lien over
[asset] to secure the equitable compensation. The law in this area is unsettled (see Re Diplock).
When Tracing ends:
1.
2.
When property dissipated – no longer exists (destroyed or disappeared)
a. Potential equitable compensation if proven to previously exist
When asset goes to Bona Fide Purchaser who has given value (purchased) without notice of the breach
a. Title of such a purchaser cannot be impugned
WRITE Plaintiff must make an election. Such election does not have to occur until after judgment If some cash left in account:
This would allow X to take the balance of its remedy as a constructive trust over (proportion of?) the bank account. If D is
broke: constructive trust as it does not matter if D is bankrupt.
ASSIGNMENTS
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The immediate transfer of a property right.
Chose in action – can only be claimed/enforced by action and not by taking physical possession Chose in possession –
rights that can be physically possessed and transferred by delivery Equity will be attracted where:
▪ Ineffective assignments of Legal property – recognised as effective in Equity
▪ Assignments of Equitable Property – not recognised at law
▪ Assignment of Legal Property which cannot be recognised at law – might be recognised in Equity
METHOD TO DECIDE VALID ASSIGNMENT FOLLOW THE SHEET
1. PRESENT V FUTURE PROPERTY RIGHT
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Future Property Right – something that either does not yet exist; or something not yet owned by the assignor
Present Property Rights – The opposite; something that exists now, and that the assignor owns
WRITE Consideration has been given for (present property) in the form of (consideration). As such, ‘equity deems done that
which ought to be done’ and will regard [transferor’s] conscience as bound by receipt of the consideration.
2. FUTURE – NO CONSIDERATION
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Money as Future Property – if a CONTRACT gives rights to receive money, this can be assigned as the contract right is
Presently Existing; the contractual right needs to be assigned
BUT: if the money that the assignor will earn under the contract is assigned, this will fail in equity as a gift of a future
right.
Norman v FCT assignment of loan interest; assignment of share dividends. BOTH failed, cannot assign something
(money) that does not exist as a gift (should have assigned all the shares + dividends)
Shepherd v FCT assigned the right to use idea + 90% of royalties – valid, presently existing right + flow on money – use
present property path
Williams v CIR an attempt to assign future earnings will fail
3. FUTURE – GIVEN CONSIDERATION
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Not recognised at CL
Equity will regard the assignor’s conscience bound by the fact that he/she has received consideration – therefore may be
enforceable
Transferor will hold property on CT for assignee until transfer is complete
May Recognise Assignment of Future Rights if Tailby o Value is given; and
o The property is adequately described NOW (ascertainable); and
o The contract can be specifically performed
o Once these elements have been satisfied and the property comes into the Assignor’s hands, the Assignor will
hold it on CT for the assignee.
4. LEGAL V EQUITABLE PROPERTY
Legal Property
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Chattels
Land – General Law and Torrens System
Shares
Choses in Action (rights – intangible property)
Equitable Property
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Interest in a partnership
Beneficial rights under a fixed interest trust
Equitable interests in land, equitable mortgage/equitable lease
5. ASSIGNABLE AT LAW – PART CHOSE?
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If assignment of property occurs absolutely this is a chose in action/possession If A tries to assign part of a chose, this can
only be assignable in Equity (NOT AT LAW)
e.g. Shepherd Case – assigned 90% of royalties for limited period = PART CHOSE IN ACTION
6. ASSIGNMENTS FOR PART CHOSE IN ACTION AND EQUITABLE PROPERTY
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If Equitable Property or Part Chose in Action, the following test from Norman v FCT:
A manifest intention to assign immediately and irrevocably; therefore, assignor’s conscience is bound by this assignment
and is valid
AND
IF EQUITABLE PROPERTY – Must be writing, and signed by the assignor to satisfy s53(1)(c)
PLA (acc. To Windeyer J in Norman v FCT)
A deed is not needed per se, but is the best evidence of an immediate intention to assign
7. RULES SATISFIED FOR COMPLETE ASSIGNMENT General Law Land
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Assigned by deed – PLA 1958 s 52(1)
Torrens System Land
o Registration of transfer, signed by both transferee/transferor, lodged with certificate of title – TLA 1958 ss 40,
104(1) (e-conveyancing: solicitors may sign OBO parties and ECoT used)
Chattels
o Delivery with intention of transferring legal ownership; or o Deed of Assignment
Shares sold off Market o Registration in books of company of an instrument in the prescribed form with certificates:
Corporations Act 2001 (Cth) s 1071B
Debts and other legal Chose in Action o In writing signed by the transferor, and notice to the debtor and other party of
the transfer: PLA 1958 s 134
8. IF RULES ARE NOT SATISFIED
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If rules are not satisfied for each scenario, use the test in Mason & McHugh JJ Corin v Patton Has the donor done
everything which was necessary to be done alone?
The donor must have done everything which was necessary to be done alone
Milroy v Lord
o Land – requires registration of transfers Issacs J, Anning
o Donor to do everything in his power Higgins J Anning
o Donor to do everything necessary for him to do Griffith CJ Anning o Includes DELIVERY of notice etc.
Thus, placing the gift/property beyond the recall of the donor Deane J, Corin v Patton Discuss whether this is a
requirement (beyond recall)
In the case of third party involvement or that the same solicitor acts for the donor and the donee (Marchesi v
Apostolou):
• Transferor can appoint agent to deliver/transfer property; however, until the donee interacts with agent, the
transfer is revocable.
• Has donor done all her alone needs to do? What is the extent of the agent’s authority as given by donor?
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In Marchesi, it was held that the donor had not done all he needs to have done, since the donor
wished to pay the stamp duty himself and had now. As such, the solicitor was still acting for the
donor. He had not yet ceased acting for the donor. The gift was not yet beyond recall.